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Elasticity
of supply measures the change in the amount that a firm supplies in response
to a change in price. It is measured as follows
percentage change in quantity supplied
percentage change in price
Again the Q is on top,
remember QPR.
Values of price elasticity of supply
·
Elasticity is greater than one - the good is elastic and is highly
responsive to changes in price. A percentage change in price leads to a
larger percentage change in the quantity supplied. A straight line supply
curve will intersect the price axis.
·
Elasticity is equal to one - the good has unitary elasticity, a
percentage change in price will lead to an equal percentage change in the
quantity supplied. Any straight line supply curve that intersects the origin
will have unitary elasticity.
·
Elasticity is less than one - the good is inelastic and not very
responsive to changes in price. A percentage change in price leads to a
smaller percentage change in quantity. . A straight line supply curve will
intersect the quantity axis.
·
Elasticity is equal to zero - the good is perfectly inelastic and a
change in price lead to no change in the quantity supplied.
·
Elasticity is equal to infinity - the good is perfectly elastic and
any decrease in price will cause the quantity supplied to fall to zero.
The
different supply curves are shown below:
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